On Friday, April 13 (appropriately enough), the UN secretary general was reported saying that the Cold War is “back with a vengeance.” The remarks were prompted by the poisoning of a Russian former spy in the UK and by US threats (later realized) of missile strikes in Syria, where there are Russian troops supporting the regime.
The world seems to be perpetually in conflict. History is often taught as the story of 3,000 years of conflict. But the possibility that the US and Russia might actually start shooting at each other boosted gold prices in mid-April. Trump all but dared Russia to try to shoot American missiles down. The BBC even ran a headline asking if this might be the beginning of WWIII.
Then, just as things were cooling off, the Chinese announced a “live fire” exercise in disputed waters in the South China Sea. That reminded investors of the other Cold War. The rhetoric on that side of the world is less heated, but with the US sailing ships through waters China now claims, the situation should not be taken lightly.
On top of this, we have the brewing trade war between the US and China, and the sanctions the US and EU are slapping on Russia. These may seem like different issues, but as the saying goes, when goods don’t cross borders, soldiers will.
Now, I am not saying that I think WWIII is imminent. That it could be is scary enough, but I’m not making that call. I’m also not saying that Russia should be able to get away with plunder and murder with no consequences. Nor am I saying that China’s trade practices are fair.
I’m not here to argue policy at all.
My purpose is to remind you that these geopolitical issues are powerful and important—and won’t be resolved quickly or easily. This has investment implications.
The easiest of those to see is that this kind of instability will generate alarming headlines for years to come. This will boost safe-haven assets like gold and silver.
Can you imagine people in China, India, or anywhere else in the world waking up tomorrow and thinking en masse: “Gee, the world feels so sane and calm now, I think I’ll sell all my gold”?
I can’t. And I’m speculating accordingly.
